U.S. policymakers now anticipate that our country will experience the worst economic crisis since the Great Depression. The U.S. is at the center of the global pandemic.
According to data compiled by John Hopkins University, the U.S. has more than 270,400 reported infections. We now have the largest portion of the world’s new cases — 30, 100. Globally, more than 1 million people have been afflicted. Adding to the woes, testing for the coronavirus has not been uniform worldwide, and rates of illness and death have been vastly unreported.
The anguish over lost jobs and paychecks, ruined businesses and the psychological toll on all Americans will leave a permanent imprint.
Former Federal Reserve Chairwoman Janet Yellen said: “The downturn has been rapid and sharp, and it’s different than any we’ve ever experienced in America.” She forecast that our economy could decline at a 20 percent annual rate.
Yellen said she felt that it is impossible to know the depth of the recession. She doubted whether America would experience a V-shaped recovery in which a quick decline is followed by a quick economic rebound. Instead, she — along with Ben Bernanke — proffered that the U.S. could have a U-Shaped recovery — a sharp downturn succeeded by a slow and gradual rebound. While it is not likely, Yellen raised the specter of the 1930’s 10-year economic malaise. In that scenario, we could have a dreaded L-shaped recovery with no rapid rebound.
Federal Reserve Chairman Jerome Powell announced at a press conference that the Fed would not publish a Summary of Economic Projections because “there is no point in in making economic forecasts right now. The economic outlook is evolving on a daily basis. It is depending heavily on the spread of the virus, and the measures taken to affect it, and how long that goes on.”
Until we find a cure for the coronavirus pandemic, our economy will remain hobbled. Dr. Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases, predicts there will be another coronavirus outbreak in the fall. Fortunately, he expects the United States to be better prepared to combat the virus than our current efforts.
While our government has responded quickly, the other two major components —business and the consumer — will be very cautious. Because businesses suddenly shut down en masse throughout our nation, their willingness to invest in new equipment and hire back furloughed workers remains problematic. Given the high unemployment numbers, consumers — representing close to 70% of the economy —will hesitate before making big purchases and will spend less than precoronavirus levels.
In March, the highly esteemed consulting firm McKinsey released their survey of economic conditions. They argued that the coronavirus outbreak overshadowed all other threats to the economy. A majority of executives expect economic conditions to deteriorate during the next six months. They worry that the longer the economy is suppressed, we will suffer from more longlasting structural damage.
To lessen our economic downturn, the Federal Reserve has enacted quantitative easing measures that surpassed our efforts a decade ago. Congress recently appropriated $2.2 trillion (10% of our gross domestic product) to counter the fallout from the epidemic.
Our policy makers recognize that we might need to take further stimulus efforts: broad tax cuts, increased cash payments to households, a more extensive suspension of student-loan payments, embarking on a trillion-dollar infrastructure projects and giving further aid to state and local governments.
The jaw-dropping tally of 10 million initial claims for unemployment insurance over the past few weeks does not tell us the depth or length of our economic malaise. We are beset by uncertainty surrounding almost every facet of our lives. The coronavirus will radically change almost everything we do: how we work, exercise, socialize, shop and manage our health.
Originally published in the Sarasota Herald-Tribune
